By Simple Dollar
Keeping efficient financial records is an important element in running any small business. To do so, more and more small business owners are realizing that business credit cards are a useful tool for organizing accounts and maintaining financial efficiency.
In fact, here are four ways in which a business credit card can be effective for your small business:
1. They help keep better track of business expenses
In just one day, a small business owner might buy office supplies with cash, pay an electricity bill with a check and use a personal credit card to take a client to dinner.
At the end of the month, expenses such as these are forgotten or receipts are mislaid. Yet they are vital for accurate record keeping. Not only is the small business owner forced to recall each amount, but written records can get lost.
Had each of these expenses been put on a single business credit card, they would all be recorded in one place, accessible online and available to check at any time. No need to dig up old receipts or go through your personal credit card spending to determine which of those items were business costs.
2. They separate business expenses from personal accounts more effectively
Accountants agree that a small business owner should not mingle personal and business expenses. Doing so can make it difficult to determine how much profit or loss you have made in a month or a year. It can also create major problems at tax time.
Using a business credit card for all business expenses will help keep track of them quite easily. In addition, many card companies send a summary at the end of the year listing expenses under categories, which is a major benefit at tax time.
3. They provide cash back and other rewards
A number of business credit cards offer cash back of one percent on every purchased item. In addition, some cards offer three or even five percent for spending on certain categories. These categories usually represent bills you would pay anyway; it only makes sense to put them on a card.
Rewards can add up to a fairly large amount each year, depending on how much spending you incur and how much of the spending is on categories that pay high percentages in rewards. In most cases, you can ask for the reward money to be paid in the form of cash. In other cases, the money is paid in as a credit on your account, gift cards or merchandise.
4. They provide you with the flexibility to buy items you need immediately
When using other methods of payment, such as cash, checks or a debit card, small businesses are limited to spending within the limits of how much is in their bank account. Although this is an effective way to avoid spending money you don’t have, there are occasions when a small business owner knows that money will become available in a week or two. You might, for example, need to stock up on inventory for special orders and are confident you can sell before the credit card bill becomes due. A business credit card makes this possible.
The bottom line
With so many credit card companies trying to compete for your business, it’s difficult to choose which one might work best. The Simple Dollar, a website devoted to financial education for individuals and businesses, recently put together a comprehensive guide to making this decision.
Regardless of company size, the right card can not only help manage cash flow and track expenses, but also can pay you back for purchases. The Simple Dollar breaks down the terms, perks and pitfalls of eight top picks, and offers helpful hacks and real-life examples for how to properly use and maximize rewards.
About The Simple Dollar
The Simple Dollar is a place where anyone can come to acquire financial information on finding the best products and services, saving money, making smart investments and controlling personal finances. Think of the The Simple Dollar as a personal finance platform you can use to make better financial decisions and grow your bank account. We won’t waste your time by delivering advice you can find on any website. We know that you are a real person. You are not just a “visitor” to us, which means we want you to come back again and again. That’s why each piece of content we publish goes through deep analysis and a rigorous process to ensure we are providing the most valuable and useful content to you.